The grocery sector stands apart in the world of retail e-commerce. While digital transformation has unlocked new growth opportunities for many retailers, grocers face a distinct set of profitability challenges that are more acute than in other verticals. Despite the surge in online grocery adoption—accelerated by the pandemic and changing consumer expectations—grocery e-commerce remains less profitable than in-store operations for the majority of grocers. In fact, over half of grocery decision-makers report that their e-commerce business is less profitable than their brick-and-mortar stores, and only 61% expect any improvement in e-commerce profitability in the near term.
Why is grocery e-commerce so uniquely challenging? The answer lies in the sector’s operational realities: high fulfillment costs, the perishability of goods, the need for rapid and flexible delivery, and the complexity of managing inventory across channels. These hurdles, combined with thin margins and rising consumer expectations for convenience, make the path to profitability especially complex for grocers.
Grocery e-commerce is labor- and logistics-intensive. Unlike non-perishable retail, groceries require careful picking, packing, and temperature-controlled delivery. The cost of fulfilling an online grocery order—especially for same-day or rapid delivery—can quickly erode margins. Last-mile delivery is particularly expensive, and the need to offer multiple fulfillment options (home delivery, curbside pickup, click-and-collect) adds further complexity and cost.
Managing fresh, frozen, and ambient products introduces a level of complexity not seen in other retail categories. Grocers must ensure product quality and safety throughout the fulfillment process, minimize waste, and maintain real-time inventory visibility across stores and digital channels. Stockouts and substitutions can damage customer trust and increase operational costs.
Consumers now expect groceries to be delivered as quickly as possible—sometimes within hours. Meeting these expectations requires investment in local fulfillment infrastructure, advanced routing, and real-time inventory management. The pressure to deliver quickly, accurately, and cost-effectively is a constant challenge.
Returns in grocery are less common than in other retail, but when they do occur, they are costly and complex due to perishability. Additionally, customer service expectations are high, with shoppers demanding seamless support across digital and physical touchpoints.
Despite these challenges, leading grocers are making targeted digital investments to improve profitability and operational efficiency. The most impactful areas include:
Grocers are prioritizing the digitization of stores, with robotics for in-store cleaning and inventory management emerging as a leading investment. Robotics not only reduce labor costs but also improve inventory accuracy and free up staff for higher-value tasks. Nearly a quarter of grocers are already investing in robotics, and this trend is expected to accelerate as technology matures.
MFCs—small, automated warehouses located close to customers—are gaining traction as a way to reduce last-mile costs and speed up order fulfillment. For grocery, MFCs are the second most important area of supply chain investment, enabling faster, more efficient picking and delivery while optimizing store space and inventory.
Shipping optimization, multiple shipping options, and inventory visibility solutions are top priorities for grocers. Investments in advanced analytics, AI-driven demand forecasting, and real-time inventory management are helping grocers reduce waste, improve product availability, and streamline fulfillment. Modernizing the supply chain is critical for balancing cost, speed, and customer satisfaction.
Grocers are increasingly leveraging business intelligence, analytics, and retail media platforms to drive new revenue streams and improve margins. By harnessing customer data, grocers can deliver personalized promotions, optimize pricing, and monetize digital shelf space through targeted advertising. These efforts not only enhance the customer experience but also create new profit opportunities.
Modernizing point-of-sale (POS) systems, enabling mobile app support (such as just-walk-out solutions), and deploying digital displays are helping grocers create seamless omnichannel experiences. Store digitization supports unified commerce, improves operational efficiency, and enables new fulfillment models like curbside pickup and click-and-collect.
At Publicis Sapient, we understand the unique pressures facing grocery retailers. Our work with leading grocers worldwide has shown that a holistic, data-driven approach—combining strategy, technology, and operational excellence—is essential for unlocking e-commerce profitability. We help grocers:
Our SPEED capabilities—Strategy, Product, Experience, Engineering, and Data—enable us to deliver end-to-end transformation tailored to the grocery sector’s needs.
Grocery e-commerce profitability is a complex, multi-dimensional challenge. But with the right digital investments and a relentless focus on operational efficiency, grocers can turn these challenges into opportunities for growth and differentiation. By embracing robotics, micro-fulfillment, supply chain modernization, and data-driven innovation, leading grocers are not only improving margins but also building the resilient, customer-centric businesses of the future.
The journey is not easy, but with the right partner and a clear digital strategy, grocery retailers can thrive in the new era of e-commerce.
Ready to transform your grocery business?
Connect with Publicis Sapient to explore how digital innovation can unlock profitability and sustainable growth in grocery e-commerce.